E-commerce is an environment that requires hard work and application of sound business disciplines, such as measuring important processes and outcomes—what we call metrics. To understand how to take these important steps toward building online success, we need to change our view of e-commerce and put it in some old, and some new, contexts. The authors of "Ecommerce Metrics and Models" explain this philosophy in the introductory chapter of their book.

This chapter is from the book

"It was the best of times, it was the worst of times." Charles
Dickens, A Tale of Two Cities

Imagine it is the summer of 1849. The setting is a saloon in a little
California railroad town. As the business of a regular evening continues, a
stranger with a wild-eyed gleam bursts through the doors and shouts:
"There's gold in them thar' hills." In that electric moment,
the realm of possibilities for everyone changed.

Fast-forward a century and a half. Substitute today and the new
digital economy for the gold country in California. Just as the landscape for
business changed at that instant in the 19th Century, here in the 21st Century
we are seeing similar possibilities and challenges. Our wild-eyed stranger could
be any of hundreds of entrepreneurs enamored with possibilities to strike it
rich in the online world of e-commerce.

Ironically, in 1849 very few made their fortunes finding and
extracting gold from the Sierra. In the Gold Rush, immigrants selling clothes,
transportation, and banking services created businesses and most of the wealth,
carrying such brand names as Levi's, Wells Fargo, and Bank of America.

Some 150 years later, the digital equivalent of those who sold picks
and shovels, blue jeans, and other items to the miners are the ones who are
reaping profits from the online Gold Rush of the last few years. We all know
about the financial services side funding and supporting seedlings. Who are the
modern-day equivalents of those who created the supporting infrastructure for
gold mines throughout the West?

To take maximum advantage of the widening range of possibilities
facing us despite bubbles bursting and shakeouts in the financial markets, we
must understand that there are still numerous and potentially lucrative options
available for conducting business on or through the Internet. Some are as
visible as a mother lode vein of ore. Others are buried deep within the gold
field and need hard work, diligence, intelligence, and a little luck in finding
the right combination of resources to tap into the vast storehouse of riches
available in the online world.

E-commerce, however, is not an automatic moneymaking machine. It is
an environment that requires a strong sense of customer service. It also
requires hard work and application of sound business disciplines, such as
measuring important processes and outcomeswhat we call metrics. To
understand how to take these important steps toward building online success, we
need to change our view of e-commerce and put it in some old, and some new,
contexts.

From its early days, Internet-enabled commerce was a random
collection of business thoughts and ideas, technologies, decisions, and
partnerships. To be successful today, these random collections must morph from a
series of loosely connected "atomized" units of business functionality
into a more robust and seamless whole. These units must combine and operate
cohesively to fulfill an entrepreneurial or corporate objective. In this
introductory chapter, we trace a few of the more pertinent evolutionary traits
of the In-ternet, and lay groundwork for the construction and analysis of
e-commerce business models.

Evolving E-Commerce

For the Internet and electronic commerce, 2000 marked a watershed year.
Activity online in page views was soaring. Victoria's Secret scored more
than two million unique visits for its Web-cast fashion show live from Cannes,
France. After a predictably slow start, NBCOlympics.com reached a
high-water mark of almost 11 million visits on the day when Laura Wilkinson won
the gold medal for platform diving, forcing a favorite from China to settle for
silver.

Needless to say, the American presidential elections pushed site
traffic to some of the highest levels for CNN, the television networks, and
other general news sites, often eclipsing offline media statistics.

With the proliferation of sites, service businesses, and venture
capital, online statistics were hitting us from all directions. "Numbers to
Know" were part of the regular fare from the media that report on
electronic commerce, coming from such diverse sourcs as market research firms,
online tracking services, investment bankers, and even government agencies. With
a little shareware on a server, even you can log trends at your site . . . and
then use the statistics to justify someone placing a banner ad on your home
page.

It was, indeed, the best of times. Page views for many merchants were
increasing, purchases of all goods and services were strong, and new software
and hardware arrived on the market at a rate that often outstripped an ability
to install it.

There were also storm warnings, indicating that the worst of times
were just around the corner. The stock market in March and April 2000 woke us up
to an incipient meltdown that would strip billions of dollars in valuations from
online companies.

Toward the end of 2000 and into 2001, the bloom was definitely off
the Internet rose. Venture capital funding of e-commerce companies rocketed from
$7 billion in 1998 and $32 billion in 1999, to $15 billion in the first quarter
of 2000, but soon plummeted. NASDAQ values for IPOs of online companies turned
sour, dragging down funding prospects for those in the queue. With the IPO
market following NASDAQ, it wasn't long after when valuations of companies
for mergers and acquisitions followed suit and dropped like a stone.

When IPOs dropped from an average of 30 deals in March 2000 to about
13 in May 2000, it was clear to all that the easy times for funding were gone.
Even for the companies that did make it out, no longer was the explosive first
day in the IPO a guaranteed success. This IPO shutout led many underwriters to
postpone or withdraw registrations with the SEC.

By the start of 2001 major players were e-liquidatorsvultures
who swooped down on dead and dying dot coms, snatched up a morsel or two of
intellectual property and customer lists, and brokered them off to survivors.
More than 40 such firms operated at year-end, focusing on online ventures.

A respected trade magazine, The Industry Standard, was
tracking online ventures going out of business! In early 2001, the
publication's Web site listed more than 80 companies, many with
high-profile names that ceased operations in 12 months.

With declining cash assets, a grouchy capital market, and regular
headlines heralding an online apocalypse, Internet executives at last started to
face reality. Companies

scrambled to cut down bloated marketing programs. Customer acquisition costs,
which ranged from $70$80 per customer in the U.S., were pared down, and
the focus shifted in part to customer retention.